Saudi assets to surge by over $94 bn in 2011

Strong oil prices will ally with increasing crude output by Saudi Arabia to boost its net foreign assets by more than $94 billion through 2011 to reach their highest ever level at the end of the year, according to the IMF.

The net foreign assets of the world’s dominant oil exporter already peaked at around $441bn at the end of 2010 and are projected to continue their climb to hit an all time high of $535.4bn at the end of 2011, an increase of nearly $94.4bn, the Washington-based International Monetary Fund said.

Total assets, including commercial banks’ deposits with the Saudi Arabian Monetary Agency (Sama), already reached a record high of SR1,897bn ($505bn) at the end of June 2011 as a result of a sharp rise in oil export earnings, which allowed the Gulf kingdom to record large fiscal and current account surpluses in 2010.

Although Riyadh has projected a SR40bn fiscal deficit this year, the budget is expected to end the year in another large surplus despite a massive increase in public expenditure.

A breakdown by the IMF showed Saudi Arabia’s net foreign assets have steadily grown over the past years due to higher crude prices and production. From around $310.3bn at the end of 2007, the assets rocketed to nearly $438.5bn at the end of 2008 before receding to about $405.9bn at the end of 2009 as a result of a steep fall in oil prices.

But a recovery in prices and higher output boosted the net assets to $441bn at the end of 2010 while total assets were higher, standing at SR1,705bn ($454bn), including nearly SR61.4bn in banks’ deposits with Sama.

The IMF report showed the surge in oil prices above $100 a barrel and higher crude supplies by Saudi Arabia would boost its oil revenue to nearly $299.6bn in 2011, exceeding the 2008 record income of $281.4bn.

Analysts believe the surge in revenue would turn a budgeted deficit into a surplus this year despite an expected 40-45 increase in public spending. In 2010, the budget reverted into a surplus of SR109bn after oil prices increased by at least $15 a barrel. For 2011, Saudi Arabia announced another record high budget of SR580bn for 2011, with a deficit of SR40bn.

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